I am dealing with an estate where the residue is split 25%
to 75% between two beneficiaries. The beneficiary receiving 75% would like to
purchase the property from the estate and buy out the other beneficiary. The
other beneficiary will not agree to this.
Are there any options other than to sell it on the open
market? Can we just proceed without his consent?
Martyn Dixon
Harold Bell & Co
Technically, I do not believe the executor needs the consent of the minority beneficiary to transfer the property to the 75% beneficiary.
This does not need to be by way of sale, although to the extent that the value might exceed their 75% share of the estate, I believe it will be subject to SDLT.
The main issue will be ascertaining the value at which the transfer will take place, which is the most likely ground for “attack” by the minority beneficiary if they follow through their objection.
The way forward is in minimising the potential for the minority beneficiary to challenge the value placed on the property. It might be beneficial, say, to obtain 3 marketing valuations from appropriately qualified valuers and effect the transaction using the highest value (which would be less objectionable to the minority beneficiary), or the mean value, which would be more in line with accepted practice.
However, if the objection is a personal issue between the beneficiaries then, regardless of value, it is likely that transferring the property to the 75% beneficiary will be problematic, even should they acquire it through a sale on the open market.
Paul Saunders
I’ve encountered this a number of times.
Providing the beneficiary wishing to buy out the estate asset is not an executor (who, having a fiduciary duty to the beneficiaries may not purchase estate assets, at the risk of having the transaction voided), the executors do not require the consent of the residuary beneficiaries in order to sell the property, whether on the open market, or privately.
This assumes, of course, that the other beneficiaries have a general right to a share of the residue, rather than a share of the property (as they might if the property is subject to a specific legacy).
However, the executors must account to the beneficiaries for their administration of the estate, and so they will want to have very strong evidence that the beneficiaries were not disadvantaged by the sale. In other words, they will want to show that they received market value or better for the property, despite making a private sale.
I would therefore suggest at least two current market valuations of the property by chartered surveyors. It may be appropriate for these to be paid for by the beneficiary wishing to purchase the property.
If the executors then sell the property for the average of these valuations, it will be difficult for the remaining beneficiary to argue that the executors acted to their disadvantage, especially when the costs of an open market sale will have been avoided.
When in doubt, consider the litigation, and what the disgruntled beneficiary needs to prove. “It’s not what I wanted” is not sufficient. They need to show loss in order to apply for damages.
Taurean Drayak
Elliot, Bond & Banbury
The 75% beneficiary is, unfortunately, also an Executor.
Martyn Dixon
Harold Bell & Co
Is it too late for him to renounce? If not, then I do not believe it will be possible for him to purchase estate property against the wishes of the beneficiaries.
Taurean Drayak
Elliot, Bond & Banbury